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Second Successive Year of Grain Surpluses

ANALYSIS - This year will see the second successive year of global grain surpluses, reports Chris Harris.

Jack Watts

However, with ever increasing demand for grains, the stocks are not really a concern for the spot markets, Jack Watts, the lead analyst for cereals and oil seeds at the AHDB Market Intelligence.

Speaking at the Grain Market Conference in London last week Mr Watts said that world grain production forecasts showed a strong performance by h3 northern hemisphere exporters.

For the 2014/15 year Europe is forecast to increase production by 10 per cent over three years at 331 million tonnes, North America by nine per cent at 481 million tonnes, the Russian Federation sates by 13 per cent.

However, the near east Asia, North Africa. South America and Australia are all expected to show slight drops in production over the period.

Mr Watts said that this year was not a year to generalise about the situation in the wheat market as heat prices are showing a great deal of variation particularly according to the type of wheat.

The expansion in coarse grain production is coming in maize which is shortly expected to reach a global high of 1 billion tonnes.

Mr Watts said that last season was about a strong production year stabilising global feed grain supplies after years of underperformance between 2010 and 2012.

The current year 2014/15 is about stock rebuilding and the removal of the anxiety around the supply for the spot markets.

“Without a weather event to keep it in check, you can expect to feel the increasing dominance of maize, even directly into the UK market,” Mr Watts said.

He said that there is still a global demand growth for maize for ethanol although this growth is not as rapid as it has been in the past.

He said the global market for maize could also be changing because of China’s attitude. It is now looking to become self-sufficient in maize unlike soy.

“Last year China imported 3.5 million tonnes of maize, this year it is down to just 78,000 tonnes,” Mr Watts said.

In the wheat sector, with record production figures last year, there is a surplus of wheat, but there is a great difference between the different varieties of wheat.

Mr Watts said the market has become very segmented.

Over the next 10 years the global grain trade is expected to grow by 10 per cent.

The surplus in wheat is expected to be held by increasing exporter stocks.

However at the same time importers could start to get strategic and start capitalising on low prices.

The effect of El Niño could damage the Australian production but at the same time it could boost next year crop in the US.

For barley, Mr Watts said that the global supply and demand looks to be remaining tight but it has to follow the dynamics of the broader grain market in order to avoid being priced out of demand.

Mr Watts said the barley sector runs the danger of being marginalised by other crops such as oilseeds and maize.